Bottom Line: Deal shows rising use of administration

Marion Dakers

WHILE the writing had been on the wall for RSM Tenon for several months, the form of its eventual sale took many by surprise.

Pre-pack administrations are an increasingly common presence on the high street, where retailers from Dreams to HMV have continued to trade following such deals, but a pre-pack for an accounting firm that itself specialises in restructuring is an intriguing new take on the genre.

The Insolvency Service estimates that one in four of the 2,808 companies placed in administration in 2011 used the pre-pack procedure – and that around four-fifths of these involved buyers already connected to the company.

RSM Tenon’s sale comes with a suitor that had declared an interest but has no ties to the now-former management, meaning this pre-pack avoids the accusations of so-called phoenixism that have been levelled against other such deals.

But its shareholders have been comprehensively wiped out, leaving several funds along with entrepreneur and former board member Bob Morton nursing losses. It remains unclear whether sole lender Lloyds Banking Group will get a better deal than it would have done under a solvent takeover.

Last month, business secretary Vince Cable launched a review of pre-packs to ensure the process is not being abused. While this arrangement has safeguarded 2,300 jobs, it is another example for the review to examine.

Marion Dakers is deputy news editor at City A.M.